Europe close: Stocks finish lower in global rout

(Sharecast News) - European equities closed lower on Tuesday, with losses seen across the region as investors awaited a series of interest rate decisions from European central banks and key US economic data, while weaker Wall Street performance and softer eurozone business surveys weighed on sentiment. The pan-European Stoxx 600 fell 0.47% to 579.80, Germany's DAX declined 0.63% to 24,076.87, France's CAC 40 eased 0.23% to 8,106.16 and London's FTSE 100 underperformed, sliding 0.68% to 9,684.79.

Russ Mould, investment director at AJ Bell, said that "having moved within sight of the 10,000 mark a little over a month ago, the FTSE 100 lost momentum again today," adding that "there appears to be little sign of a Santa Rally as concerns about tech valuations continue to knock sentiment in US and Asian markets."

The cautious tone followed declines in US markets on Monday, where major indices closed lower as artificial intelligence-linked stocks extended losses ahead of a heavy US data calendar.

Broadcom fell more than 5% and Oracle dropped over 2% as last week's rotation away from AI continued, while investors shifted towards consumer discretionary, industrial and healthcare names.

Patrick Munnelly, market strategy partner at TickMill, noted that "stocks declined while the Dollar held steady at two-month lows as investors scaled back on risk ahead of key US economic reports that might signal the future of interest rates," adding that futures pointed to further weakness as "traders exercised caution before the November US jobs report."

Attention this week remained on a backlog of delayed US economic releases following the autumn government shutdown.

Eurozone trade balance stable as business activity eases

In the eurozone, fresh data showed the trade balance remained stable in October but at a significantly stronger level than a year earlier.

The region recorded a €18.4bn surplus in goods trade, unchanged from September but €7.1bn higher year-on-year, as exports rose 1.0% to €258.0bn while imports fell 3.6% to €239.6bn, the sharpest annual decline in at least a year.

The improvement was driven largely by the energy sector, where the trade deficit narrowed to €17.0bn from €24.7bn a year earlier.

Over the first 10 months of the year, exports rose 2.9% to €2.463trn, while imports increased 3.0% to €2.318trn.

Business activity across the eurozone eased more than expected in December, according to the HCOB flash composite PMI from S&P Global, which fell to a three-month low of 51.9 from 52.8.

Manufacturing remained in contraction at 49.2, while services slowed to 52.6.

Hamburg Commercial Bank chief economist Cyrus de la Rubia said growth softened due to weakness in German industry and fading momentum in services, adding that while services remain a stabilising force, a sustained upturn will depend on a recovery in manufacturing.

Munnelly said the broader market backdrop reflected "a growing sense of unease in the closing weeks of a year that began with April's market lows ... followed by a robust AI-driven recovery and easing from the Fed," with investors now looking to this week's data "to gain clarity on whether this trend can sustain itself."

In Germany, investor sentiment improved sharply, with the ZEW Indicator of Economic Sentiment rising to a five-month high of 45.8 in December, up 7.3 points from November.

Expectations improved across export-oriented sectors including autos, chemicals and metals, while sentiment in banking and insurance also strengthened.

However, the assessment of current conditions deteriorated further to -81.0, underlining the fragile nature of the recovery.

Expectations for the wider eurozone also improved, while the current assessment slipped.

UK data provided a mixed backdrop - unemployment edged up to 5.1% in October, while wage growth slowed, though remained above consensus.

Total earnings rose 4.7% and regular pay increased 4.6%, both down from September.

The Office for National Statistics said payroll numbers continued to fall and hiring remained subdued, particularly among younger workers.

Mould said that "the chances of an interest rate cut from the Bank of England this Thursday, already widely priced in by the market, looked to have ticked higher off the back of an increase in the UK unemployment rate."

Munnelly added that the labour market showed "modest deterioration, unlikely to alter the 90% odds of a 25 basis points Bank Rate cut on Thursday."

At the same time, survey data suggested the UK economy regained some momentum in December.

The flash composite PMI rose to 52.1, driven by a rebound in manufacturing, where output hit a 15-month high.

Services activity also improved, and new business grew at the fastest pace in over a year, although economists cautioned that overall growth remains modest and job losses remain widespread.

IG in the green, defence stocks slide

In equities, IG Group surged 7.72% after extending its share buyback programme and reaffirming confidence in achieving its medium-term revenue growth targets ahead of schedule.

Defence stocks fell broadly after comments from Ukrainian president Volodymyr Zelenskyy raised the prospect of progress towards a peace deal with Russia.

Mould said defence names were lower after comments from Donald Trump that peace between Ukraine and Russia is "'closer than ever' after a phone call with Ukrainian president Volodymyr Zelenskyy."

Saab dropped 4.81%, Rheinmetall fell 4.51%, Leonardo lost 3.9%, Hensoldt declined 4.36%, Renk slid 3.54%, BAE Systems eased 2.33% and Thales fell 1.64%.

Reporting by Josh White for Sharecast.com.